SYT Syngenta Ag (delisted)

By John Revill And Jacob Bunge 

ZURICH-- Syngenta AG on Thursday moved to appease shareholders angered by its rejection of a takeover from Monsanto Co., saying it will divest its global vegetables seeds business and return more than $2 billion to shareholders.

The planned sale would strip out a business that generated $663 million in sales last year, or about 4% of Syngenta's $15.13 billion in total revenue, and that boasts among the highest gross profit margins among its seed businesses. But executives said the vegetable-seeds division has less of a fit than other units with its main business selling pesticides.

Syngenta Chief Financial Officer John Ramsay said the decision to sell the vegetable-seeds business wasn't driven directly by Monsanto's aborted acquisition effort, but that it illustrates how Monsanto's bid had undervalued Syngenta's business.

"I hope this process will give the shareholders confidence in the underlying value of the company and support our clear view in rejecting the Monsanto proposals," Mr. Ramsay said in an interview.

He declined to say what Syngenta expects the vegetable-seeds operation to sell for, but said previous deals in the sector had been between valued at three-to-five times sales. That suggests the vegetables-seeds business could fetch around $2 billion to $3 billion.

Syngenta came under heavy criticism from some shareholders after Monsanto last week abruptly dropped its long-running acquisition effort, which would have formed the largest combined seller of seeds and pesticides world-wide. Monsanto said last week it had raised its cash-and-stock offer on Aug. 18 to 470 Swiss francs ($485) a share, or roughly $46 billion. Syngenta rejected the proposal as undervalued and unlikely to win regulatory approval.

The episode raised pressure on the Basel-based company to demonstrate that a stand-alone strategy can deliver better value, at a time when low crop prices have slashed farmers' profits and forced them to scrutinize spending on supplies like seeds and chemicals.

Syngenta Chief Executive Mike Mack said that because vegetables are heavily grown in greenhouses, they require less pesticides and aren't as able to be tightly integrated with Syngenta's chemical portfolio as crops like corn and soybeans. He said that selling the vegetable-seed operations would keep the company on track to meet its 2018 profitability targets.

"Right now is our opportunity to do value maximization," Mr. Mack said in an interview.

Shareholder reaction was mixed. "It is a start," said Andrea Williams, a fund manager at Royal London Asset Management. "But I don't think it does take the heat off the (Syngenta) management, they still need to prove their integrated strategy is working and the margins must improve."

While shareholders may welcome the buyback, the sale of a highly profitable business and hard feelings over Syngenta's handling of Monsanto's approach would still leave Syngenta with "a lot of unhappy shareholders," said Markus Baechtold, a fund manager at Luzerner Kantonalbank.

Syngenta shares on Thursday settled 3.5% higher at 338.20 Swiss francs. They remain down about 10.5% since Monsanto withdrew its pursuit.

Mr. Mack said proceeds from the divestiture, and from a planned sale of Syngenta's flower-seed business announced in August, would help support share repurchases. He said Syngenta doesn't plan to pursue any major acquisitions, and that there is little chance of any sector-changing mergers in the seed and pesticide business.

"The fact of the matter is there are not a lot of big properties that come to the market, and to the best of my knowledge now, none are ready to come to the market," he said.

Mr. Mack said that while some Syngenta shareholders may have been frustrated at missing out on a Monsanto deal, others understand Syngenta's reasons for refusing to enter talks.

"Shareholders are going to be justly rewarded for their patience," he said.

Syngenta ranked as the third-largest vegetable-seed supplier globally according to a January report from French seed producer Vilmorin & Cie.

Mr. Ramsay said he expected the vegetables seeds business to be sold as one unit, with a deal completed in the next 12 months. Syngenta executives said they expect significant interest in the asset from other agricultural companies and private-equity buyers, though Mr. Mack said none had previously contacted Syngenta about acquiring it.

Mr. Ramsay said Syngenta could sell other businesses, although this wasn't the company's primary objective.

Neil MacLucas contributed to this article.

Write to John Revill at john.revill@wsj.com and Jacob Bunge at jacob.bunge@wsj.com

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(END) Dow Jones Newswires

September 03, 2015 14:01 ET (18:01 GMT)

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